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Gold has been trading in a channel that goes back to 1999.
Channel resistance is indicated by line 1 and channel support is indicated with line 2.
Since the high reached above $1 000 we see a series of lower highs forming.
This is characteristic of a down trend. Gold also fell below the critical support we last discussed at $750. This again reinforces the down trend.
We show support as the red ellipse that currently lies between $650 and $600. This is on the channel support area and confirmed by the 50% retracement of the advance since 2001.
This support is important to hold as a failure here could result in more downside towards $550.
From this $600 low an important bounce should follow.
This advance must take gold to above $850 to be indicative of more upside to follow. Failing to rise above $850 will simply result in a fallback and retest of the low.
The following chart illustrates:
